OMCs gain as US-China trade war fears weigh on oil prices

09 July, 2018, 23:45 | Author: Regina Silva
  • Strait of Singapore

Looming over the oil markets is the trade dispute between the U.S. and China, the world's two biggest economies.

Oil prices were mixed on Monday, with global prices boosted by ongoing supply issues in Libya, while signs of rising output in the US weighed on West Texas Intermediate crude.

Oil benchmarks went in different directions again on Friday afternoon, with WTI trading up and Brent trading down as fears of the escalating U.S.

The Taiwan Futures Exchange (TAIFEX) has launched its first energy futures contract - Brent Crude Oil Futures.

China says it will immediately retaliate, and U.S. President Trump said on Thursday he may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods.

But by 5.28am GMT, US West Texas Intermediate (WTI) crude futures were up 13c or 0.2% from their last settlement at $$73.07 a barrel.

According to the latest estimates, American crude shipments to China are around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.

"The Chinese have to do the tit-for-tat, they have to retaliate", said John Driscoll, director of consultancy JTD Energy, adding that cutting US crude imports was a means "of retaliating (against) the U.S.in a very substantial way".

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US markets also garnered support from a government employment report showing better-than-expected growth in jobs. "We will switch to either Middle East or West African supplies", he said.

OPEC and its allies agreed earlier this month to a modest increase in output to dampen the oil price rally, which hit a 3-1/2 year high.

-China trade dispute, most traders agree that yesterday's government report is exerting the most pressure on the market.

Import duties would make US oil uncompetitive in China, forcing its refiners to seek alternative supplies in a tight market.

Energy consultancy FGE on Friday issued a stark warning of looming supply shortages due to USA sanctions against Iran, and because of disruptions elsewhere. By some estimates, about 1.7 to 2 million bpd of crude and condensate would be cut out of markets once the sanctions are implemented.

United States investment bank Jefferies said on Friday it expected a decline in Iranian exports "well in excess" of 1-million barrels a day due to the U.S. sanctions.

"If the Saudis and others replace the losses from Iran, there will be basically no spare capacity left", Societe Generale analyst Michael Wittner said.

In addition to reducing the price of its August barrels, Saudi Arabia also told the Organization of the Petroleum Exporting Countries (OPEC) that it increased production by nearly 500,000 barrels per day last month.

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